European Microfinance Week 2014

Kompanion Financial Group from Kyrgyzstan won the 5th European Microfinance Award for its Pasture Land Management Training Initiative, which provides a specialized "Credit for Conservation" loan linked to a training program for livestock farmers that introduces sustainable land management practices and helps restore previously degraded lands. With the country facing widespread pasture degradation due to decades of poor farming practices and land mismanagement, Kompanion's initiative was selected after three rounds of adjudication for its innovative and sustainable ideas, and for best meeting the Award criterion of "integrating environmental governance into the DNA of [its] business and promoting initiatives that go above-and-beyond business as usual to incorporate environmental sustainability".

This year's Award ceremony, promoting the theme of "Microfinance and the Environment", took place on 13th November at the European Investment Bank (EIB) in the middle of the e-MFP-hosted European Microfinance Week, with Her Royal Highness The Grand Duchess of Luxembourg presenting the Award, and presentations by Romain Schneider, the Luxembourg Minister for Development Cooperation and Humanitarian Affairs; Werner Hoyer, the President of the EIB; Michel Maquil, Chairman of InFiNe.lu and Moderator Bob Christen, President of the Boulder Institute of Microfinance.

The European Microfinance Award ceremony gathered together leading European investors, practitioners, raters, analysts and support providers. The Award has built a considerable industry reputation since the Luxembourg Ministry of Foreign and European Affairs launched it in 2005. Jointly organised by Luxembourg's Directorate for Development Cooperation, the European Microfinance Platform (e-MFP), and the Inclusive Finance Network Luxembourg (InFiNe.lu), this year's Award garnered 26 applications from 19 countries. The theme was described by Bob Christen, who said in his introduction that environmental issues are gaining global relevance in microfinance, moving beyond the Hippocratic standard of Do No Harm to "a more positive affirmation of its role with financial services in creating a more sustainable planet".

Environmental changes, as Romain Schneider said, "disproportionately affect the poorest people in developing countries, and the examples of this year's finalists...demonstrate that financial inclusion and environmental sustainability can go hand-in-hand. I expect that their examples will promote greater focus on the environment across the sector" - adding that next year marks the milestone of the UN's Millennium Development Goals, to be replaced by the Sustainable Development Goals (SDGs).

The environmental principles within the SDGs are well exemplified within this year's winner, Kompanion Financial Group, an MFI from Kyrgyzstan, established in 2004 and with over 100,000 clients and a portfolio of E61 million. The third largest financial institution in Kyrgyzstan by clients and the second largest by portfolio size, Kompanion is active in all seven regions of Kyrgyzstan. It provides microloans alongside technical assistance to small-scale farmers and pastoralists (mainly livestock herders and shepherds) to promote sustainable agriculture and natural resource management. In April 2014, it received SMART Campaign certification for Client Protection.

Kompanion won for its Pasture Land Management Training Initiative - an ethno-ecological approach to pasture land preservation which addresses the pressing issue of pasture land degradation in Kyrgyzstan. Pastures account for 85 per cent of all agricultural land in Kyrgyzstan, and the PLMTI comprises a specialised loan package called ‘Credits for Conservation' linked with training. Local land managers are taught how to sustainably optimise grazing land, how to tend their livestock and are made aware of their legal rights to help them protect their stake in local environmental resources.

Since 2011, Kompanion has trained more than 24 thousand clients through this self-financed initiative, with measurable increases in pasture productivity and client household income - of 30 per cent, on top of a cost decrease of 15 per cent. Positive impacts in biodiversity include reduction in the use of harmful chemicals and hormones in livestock breeding, increased use of organic compost and uptake of beneficial biological soil management techniques by clients.

In addition to the initiative, Kompanion has had an environmental policy in place since 2011. Kompanion collects and analyses scientific and cultural practices on an on-going basis, and when appropriate, adopts these into client training programs. Since June 2012 Kompanion has adopted an environmental and social risk assessment policy requiring loan officers to consider environmental issues in credit assessment.  

According to Olesia Paukova, Director of Development Services of Kompanion Financial Group, and who collected the prize from the Grand Duchess: "With the prize money we plan to develop a ‘mobile classroom' to reach the herders in remote pasture lands and provide trainings in more villages across Kyrgyzstan. We will also develop video materials to be used in public schools in remote areas. These materials will connect students in those areas with our livestock management experts who will present the best pasture land management practices. This will increase our outreach even further."

While there could be only one winner, special note should be made to the two other finalists. ESAF Microfinance and Investments in India, with its Clean Energy for the Poor initiative, provides rural clients with solar energy solutions, efficient cook stoves, and water filters. To date, over 60,000 clean energy products have been funded through microcredit to clients most of whom live on less than $2 a day. And XacBank LLC in Mongolia was recognised for its Eco Product Program, under which it has facilitated the purchase of over 150,000 energy efficient heating and insulation products to poor ger district households in Ulaanbaatar.

Since 2005, the European Microfinance Award has been held every two years. From now on, however, it will be an annual award - reflecting its growing importance in the industry, and the importance of encouraging innovation in an industry looking beyond the provision of financial services, but to creation of an ecosystem of human development in developing countries, supported by European institutions, and which attracts talent, ideas and imagination from across the world.